Tesla shareholders will vote on Elon Musk’s big payday. What happens then?

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Tesla could use shareholder approval to support Musk’s case in court. If it wins the vote on Musk’s compensation, the company is likely to turn to Chancellor Kathaleen McCormick, the Delaware Court of Chancery judge who rejected the compensation plan, and argue that shareholders, armed with information she says she not having had it when they approved the package, they ratified the proposal again. This, according to the company, makes the issue controversial.

If McCormick were to declare the plan acceptable, it is likely that the plaintiffs who initially sued will appeal to the Delaware Supreme Court. Among their potential arguments: The new vote does not resolve an issue that had already been decided by a judge, and shareholder votes may have been influenced by implicit threats to Tesla’s future if the vote did not go Musk’s way.

A shareholder’s rejection of a compensation package could lead to a new settlement or lawsuit. The company will most likely continue its efforts in the Court of Chancery to reinstate the 2018 agreement. But Tesla said in a statement Monday that if that plan is not ultimately ratified, the automaker may have to negotiate compensation in lieu of the plan with Musk “to motivate him to dedicate his time and energy to Tesla.” He added that “for Musk to accept it, any new plan would have to be similar in scope to the 2018 plan.”

As Robert W. Baird analyst Ben Kallo told DealBook: “It’s kind of ‘take my ball and go home.'”

Since Tesla’s stock value has increased significantly since 2018, creating a replacement plan may ultimately be more expensive than restoring the old one. Tesla incurred an accounting expense of $2.3 billion for the original plan. The company estimated that more than $25 billion in accounting fees would be needed today to provide a functionally equivalent plan.

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